Question 1

The future value of a deposit in a savings account will be larger

Accepted Answer

A) the longer a person waits to withdraw the funds. 
B) the higher the interest rate is. 
C) the larger the initial deposit is. 
D) All of the above are correct. 
A) the longer a person waits to withdraw the funds. 
B) the higher the interest rate is. 
C) the larger the initial deposit is. 
D) All of the above are correct.

Question 2

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3%.The future value of the $500 in 5 years to the nearest cent is

Accepted Answer

A) $575.00 
B) $578.81 
C) $579.64 
D) None of the above is correct. 
A) $575.00 
B) $578.81 
C) $579.64 
D) None of the above is correct.

Question 3

What is the future value of $450 at an interest rate of 9 percent two years from today?

Accepted Answer

A) $534.65 
B) $546.35 
C) $565.18 
D) $574.13 
A) $534.65 
B) $546.35 
C) $565.18 
D) $574.13

Question 4

Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is

Accepted Answer

A) $725.62.It would be higher if the interest rate were higher. 
B) $727.28.It would be higher if the interest rate were higher. 
C) $725.62.It would be lower if the interest rate were higher. 
D) $727.28.It would be lower if the interest rate were higher. 
A) $725.62.It would be higher if the interest rate were higher. 
B) $727.28.It would be higher if the interest rate were higher. 
C) $725.62.It would be lower if the interest rate were higher. 
D) $727.28.It would be lower if the interest rate were higher.

Question 5

Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest rate.How much money do you have in your account now?

Accepted Answer

A) $22,880.00 
B) $23,200.00 
C) $23,232.00 
D) $23,328.00 
A) $22,880.00 
B) $23,200.00 
C) $23,232.00 
D) $23,328.00

Question 6

You are better off choosing $100 today rather than $200 in 9 years if the interest rate is

Accepted Answer

A) lower than about 8 percent. 
B) higher than about 8 percent. 
C) lower than about 10 percent. 
D) higher than about 10 percent. 
A) lower than about 8 percent. 
B) higher than about 8 percent. 
C) lower than about 10 percent. 
D) higher than about 10 percent.

Question 7

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Accepted Answer

A) $95.50 
B) $95.24 
C) $95.00 
D) None of the above are correct to the nearest cent. 
A) $95.50 
B) $95.24 
C) $95.00 
D) None of the above are correct to the nearest cent.

Question 8

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

Accepted Answer

A) $2,000/1.06 
B) $1000/(1.06)2 
C) $1000/(1 + 0.062) 
D) None of the above are correct. 
A) $2,000/1.06 
B) $1000/(1.06)2 
C) $1000/(1 + 0.062) 
D) None of the above are correct.

Question 9

Amelia knows that she has about $105 in her bank account.She knows she earned an interest rate of 4 percent,but she doesn't remember how much she opened the account with a year ago.How much did she put in?

Accepted Answer

A) $98.18 
B) $100.96 
C) $102.04 
D) $103.24 
A) $98.18 
B) $100.96 
C) $102.04 
D) $103.24

Question 10

Which,if any,of the present values below are computed correctly?

Accepted Answer

A) A payment of $100 to be received one year from today,with a 2 percent interest rate,has a present value of $98.81. 
B) A payment of $200 to be received two years from today,with a 3 percent interest rate,has a present value of $188.52. 
C) A payment of $300 to be received three years from today,with a 4 percent interest rate,has a present value of $234.34. 
D) None of the above are correct to the nearest cent. 
A) A payment of $100 to be received one year from today,with a 2 percent interest rate,has a present value of $98.81. 
B) A payment of $200 to be received two years from today,with a 3 percent interest rate,has a present value of $188.52. 
C) A payment of $300 to be received three years from today,with a 4 percent interest rate,has a present value of $234.34. 
D) None of the above are correct to the nearest cent.

Question 11

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

Accepted Answer

A) 3 percent 
B) 5 percent 
C) 7 percent 
D) 9 percent 
A) 3 percent 
B) 5 percent 
C) 7 percent 
D) 9 percent

Question 12

A firm has three different investment options.Option A will give the firm $10 million at the end of one year,$10 million at the end of two years,and $10 million at the end of three years.Option B will give the firm $15 million at the end of one year,$10 million at the end of two years,and $5 million at the end of three years.Option C will give the firm $30 million at the end of one year,and nothing thereafter.Which of these options has the highest present value?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) The answer depends on the rate of interest,which is not specified here. 
A) Option A 
B) Option B 
C) Option C 
D) The answer depends on the rate of interest,which is not specified here.

Question 13

You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years?

Accepted Answer

A) $500(1.05)2 + $500/(1.05)2 
B) $500(1.05)2 + $500 
C) $500 + $500/(1.05)2 
D) $500 + $500 
A) $500(1.05)2 + $500/(1.05)2 
B) $500(1.05)2 + $500 
C) $500 + $500/(1.05)2 
D) $500 + $500

Question 14

You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago.If,instead of being careless with the $1 in change,this person had deposited it into a bank and earned 2 percent interest every year for 140 years,how much would be in the account today according to the rule of 70?

Accepted Answer

A) $4 
B) $8 
C) $16 
D) $32 
A) $4 
B) $8 
C) $16 
D) $32

Question 15

Fourteen years ago William put money in his account at First National Bank.William decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

Accepted Answer

A) 5 percent 
B) 7 percent 
C) 10 percent 
D) 14 percent 
A) 5 percent 
B) 7 percent 
C) 10 percent 
D) 14 percent

Question 16

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

Accepted Answer

A) $285.83 
B) $236.98 
C) $202.04 
D) $145.65 
A) $285.83 
B) $236.98 
C) $202.04 
D) $145.65

Question 17

What is the future value of $800 one year from today if the interest rate is 7 percent?

Accepted Answer

A) $747.66 
B) $756.00 
C) $856.00 
D) None of the above are correct to the nearest cent. 
A) $747.66 
B) $756.00 
C) $856.00 
D) None of the above are correct to the nearest cent.

Question 18

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3 percent.The future value of the $500 after 1 year is

Accepted Answer

A) $485.44. 
B) $496.50. 
C) $509.28. 
D) $515.00. 
A) $485.44. 
B) $496.50. 
C) $509.28. 
D) $515.00.

Question 19

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest,and at the end of the N years you have $4,082.59.What is the number of years,N?

Accepted Answer

A) 4 
B) 5 
C) 6 
D) 7 
A) 4 
B) 5 
C) 6 
D) 7

Question 20

The K-Nine dog food company is considering the purchase of additional canning equipment.They expect that adding the equipment will yield $200,000 at the end of the first year and $250,000 at the end of the second year and then nothing after that.At which of the following prices and interest rates would K-Nine buy the equipment?

Accepted Answer

A) $415,000 if the interest rate is 5% 
B) $419,000 if the interest rate is 4% 
C) K-Nine would buy the equipment in both cases. 
D) K-Nine would not buy the equipment in either case. 
A) $415,000 if the interest rate is 5% 
B) $419,000 if the interest rate is 4% 
C) K-Nine would buy the equipment in both cases. 
D) K-Nine would not buy the equipment in either case.

Exam 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money

The future value of a deposit in a savings account will be larger

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3%.The future value of the $500 in 5 years to the nearest cent is

What is the future value of $450 at an interest rate of 9 percent two years from today?

Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is

Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest rate.How much money do you have in your account now?

You are better off choosing $100 today rather than $200 in 9 years if the interest rate is

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

Amelia knows that she has about $105 in her bank account.She knows she earned an interest rate of 4 percent,but she doesn't remember how much she opened the account with a year ago.How much did she put in?

Which,if any,of the present values below are computed correctly?

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years?

Fourteen years ago William put money in his account at First National Bank.William decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

What is the future value of $800 one year from today if the interest rate is 7 percent?

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3 percent.The future value of the $500 after 1 year is

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest,and at the end of the N years you have $4,082.59.What is the number of years,N?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income